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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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Bounce in oil helps to steady equities - AM Briefing
30 Mar 2017
US stock indices consolidate - Video Update
29 Mar 2017
Risk appetite returns - AM Briefing
29 Mar 2017
S&P500 - Topping out, or consolidating? PM Bulletin
28 Mar 2017
Risk appetite returns after the Trump wobble - AM Briefing
28 Mar 2017
Beware hidden relationships between seemingly unrelated markets - Trading Guides
27 Mar 2017
Risk assets slump in wake of Trump’s healthcare debacle - AM Briefing
27 Mar 2017
Congress vote puts markets on hold - AM Briefing
24 Mar 2017
Markets on hold ahead of crucial vote - Video Update
23 Mar 2017
Tranquil markets await big data - AM Briefing
23 Mar 2017
Investors rattled after equity sell-off - Video Update
22 Mar 2017
US Markets Snap 109-Day Streak - AM Briefing
22 Mar 2017
Crude oil update - PM Bulletin
21 Mar 2017
European markets stable on the open - AM Briefing
21 Mar 2017
Dollar slips after G20 communique - AM Briefing
20 Mar 2017
FOMC post-mortem - Video Update
16 Mar 2017
Rate hike sends stocks higher - AM Briefing
16 Mar 2017
FOMC rate decision and Dutch election in focus - Video Update
15 Mar 2017
Oil rally gives markets lift - AM Briefing
15 Mar 2017
Crude trades at lowest levels since production cut agreement - PM Bulletin
14 Mar 2017
Politicians take centre stage again - AM Briefing
14 Mar 2017
Trading Psychology: Risk Management - Trading Guides
13 Mar 2017
Article 50 deadline approaches - AM Briefing
13 Mar 2017
European stocks push higher after Draghi’s hawkish stance - AM Bulletin
10 Mar 2017
Non-Farm Payroll look-ahead - PM Bulletin
09 Mar 2017
Fed rate hike seems certain - AM Briefing
09 Mar 2017
Market expects Fed to hike rates next week - Video Update
08 Mar 2017
Another twist in the French election - AM Briefing
08 Mar 2017
Odds slashed on Fed rate hike - PM Bulletin
07 Mar 2017
Investors lacking direction this morning - AM Briefing
07 Mar 2017
Fibonacci Retracement - extensions - Trading Guides
06 Mar 2017
Equities slip in early Monday trade - AM Briefing
06 Mar 2017
Modest profit-taking sees US indices post rare loss - AM Briefing
03 Mar 2017
Crude struggles to break above resistance - Video Update
02 Mar 2017
UK baffled by the origins of their favourite brands - PM Bulletin
02 Mar 2017
Fresh record highs for major indices - AM Briefing
02 Mar 2017
All eyes turn to the Fed - Video Update
01 Mar 2017
Markets react positively to Trump speech - AM Briefing
01 Mar 2017
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There’s been plenty of speculation over whether the top is in for the S&P500 or if this month’s pull-back is simply a long-overdue consolidation before we get another leg higher. As a reminder of where we’ve come from: at the beginning of this month the S&P500 hit a fresh all-time record high, bolstered by Donald Trump’s first speech to Congress. The event was highly anticipated, with some likening it to a “State of the Union” address which comes after a President has been in office for at least a year. The speech was light on policy, yet investors saw it as both optimistic and presidential. It went a long way to convince investors that Mr Trump is capable of reaching out to politicians on both sides of Congress and addressing all US citizens, even if a significant percentage of them can’t bring themselves to listen to him.

The price spike on 1st March followed a tremendous run for the major US stock indices which began straight after the presidential election. This has seen the S&P500 rally by around 18% from the immediate post-election low on the 9th November to the post-speech high on 1st March. But since then the major indices have struggled to build on these gains and the S&P500 has now given back a little over 3% since the beginning of the month. In fact, there was some mild panic expressed this time last week when the Dow and S&P500 both closed down over 1% in a single day for the first time in five months. This came on the back of a fall in US Treasury yields, a lower dollar, weaker oil and concerns ahead of the vote on health care reform.

Yesterday began with another sharp sell-off as investors reacted to the Trump administration’s failure to drive through the repeal and replacement of Obamacare at the end of last week. While the timetable for reform is now less cluttered, there are concerns that the failure to repeal the Affordable Care Act means there’s less money available for tax giveaways. In addition, Trump’s opponents, on both sides of Congress, will be more willing to take a stand against the President following last week’s debacle.

Yet it didn’t take long for investors to rush back in on the buy-side. Last night there was a sharp turnaround on Wall Street that saw all the major US indices bounce off the lows made at the beginning of yesterday’s session. The buying continued into today’s open. Once again, it seems that investors are happier buying the dips than selling the rips. Of course, it helps that both the dollar and oil have steadied today, and no doubt this is helping to improve sentiment.

But the big question is where we go from here? The US Federal Reserve seems intent on tightening monetary policy further, and ultimately that is a headwind for equities and risk assets. At the same time, while sentiment data such as manufacturing PMIs, non-manufacturing PMIs and consumer confidence surveys are all improving, hard data such as retail sales, durable goods and wholesale inventories have disappointed. The unemployment situation continues to improve, but the outlook for GDP growth isn’t so hot.

A look at the chart below shows that despite this month’s sell-off the upward trend in the S&P500 is still in place. As we can see, the 20, 50 and 100-day exponential moving averages (EMA) are all stacked up in the right order, although the 20-day EMA has begun to turn lower. On top of that there’s a slight negative divergence between the price action in the S&P500 since the end of 2016 and the MACD. While there’s nothing here to signal an imminent pull-back, it’s worth being cautious. 



Posted by David Morrison

Category: PM Bulletin

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